Capital market strings seen in IMF hands

The strings of capital market are likely in the hands of International Monetary Fund (IMF) as it reviews its $6 billion loan programme next week, where an approval could send the market soaring, traders said.

KSE-100 Shares Index, the benchmark of Pakistan Stock Exchange, closed the week at 45,078 points, gaining 60 points, up 0.13 percent, week-on-week.

“With Pakistan and IMF 6th Review scheduled for next week (February 2), any positive outcome could be a key trigger for the local bourse,” said a report by Arif Habib Ltd, a brokerage house.

Moreover, with the ongoing result season, certain sectors and scrips were expected to stay under the limelight, the brokerage said.

“Albeit, we expect the market to be positive in the next week,” said the report.

The market got off to a negative start this week, owing to concerns arising from expectations of a hike in the policy rate.

It turned green after Monetary Policy Committee (MPC) kept the policy rate unchanged.

However, momentum remained in check given a surge in international oil prices, climbing up to a 7-year high, which raised concerns over inflation.

Rising Covid-19 cases and postponement of IMF’s review kept the market range-bound. Meanwhile, reduction in cut-off yields of the government’s Market Treasury Bills by 68 bps also provided some resistance against the mostly dominant bears.

The market also welcomed the passing of SBP bill 2021 by the Senate as it was one of the IMF top conditions tied to disbursement of $1 billion tranche of the $6 billion Extended Funding Facility (EFF) programme.

Week-on-week, average volumes were recorded at 187 million shares, down 7 percent, while average traded value settled at $38 million, down 9 percent.

Foreign selling continued this week as overseas investors sold equities worth $4.0 million compared to a net sell of $2.09 million last week.

Major selling was witnessed in technology and communication ($2.4 million) and cement ($1.3 million). On the local front, buying was reported by companies ($19.5 million) followed by mutual funds ($4.8 million).

Sector-wise positive contributions came from cement (55 points), power generation and distribution (45 points), food and personal care products (30 points), fertiliser (26 points), and commercial banks (24 points). Stock-wise positive contributors were HUBC (50 points), BAFL (38 points), LUCK (36 points), FFC (32 points), and TRG (30 points).

Sectors that contributed negatively included technology & communication (52 points), oil & gas exploration companies (50 points), and automobile assemblers (14 points).

Stocks, which contributed positively included KAPCO (30 points), MARI (24 points), and BAHL (23 points).

Wasil Zaman, an analyst at JS Research, said cement remained among top performers, up 1.2 percent week-on-week, while on the other hand technology was a major underperformer as it declined by 1.9 percent week-on-week.

On the news front, the government announced it was to launch Ehsaas Petrol Card for bikers, forex reserves dropped to $867 million, PRL said it was set to start exporting furnace oil from February, Nepra cleared phasing out of Rs20 billion power subsidies, current account deficit jumped to $9.1 billion for 1HFY22 as against a surplus of $1.2 billion during 1HFY21.

The current account deficit now stands at 5.7 percent of the GDP.